UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~September~~SEPTEMBER 30, ~~2022.~~2023.

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.

Commission File Number: 001-37858

CANTERBURY PARK HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

	Minnesota		47-5349765
	(State or Other Jurisdiction of Incorporation or		(I.R.S. Employer
	Organization)		Identification No.)

	1100 Canterbury Road
	Shakopee, MN 55379

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (952) 445-7223

Securities registered pursuant Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock Common stock, $.01 par value	CPHC	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

	Large accelerated filer	☐		Accelerated filer	☐
	Non-accelerated filer	☒		Smaller reporting company	☒	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes

☐

☒

The Company had ~~4,880,031~~4,944,642 shares of common stock, $.01 par value, outstanding as of November ~~14, 2022.~~10, 2023.

	(Unaudited)				(Unaudited)
	*September 30,*		*December 31,*		*September 30,*		*December 31,*
	*2022*		*2021*		*2023*		*2022*
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	18,654,496	$	11,869,866	$	25,727,477	$	12,989,087
Restricted cash		3,555,359		3,728,887		2,348,076		3,116,916
Accounts receivable, net of allowance of $19,250 for both periods		1,887,657		388,304
Short-term investments						4,500,000		5,000,000
Accounts receivable, net of allowance of $19,250 for both periods						1,619,887		618,365
Employee retention credit receivable		6,103,236		6,314,468		—		6,103,236
Inventory		291,771		248,389		284,443		262,073
Prepaid expenses		486,554		580,799		499,149		557,520
Income taxes receivable and prepaid income taxes		2,550,987		1,264,056		2,426,364		2,052,364
Total current assets		33,530,060		24,394,769		37,405,396		30,699,561

LONG-TERM ASSETS
Deposits		27,000		29,500		—		27,000
Other prepaid expenses		41,774		66,632		8,414		41,774
TIF receivable		13,035,746		12,502,743		13,801,141		13,294,337
Related party receivable		2,323,840		2,178,799		2,938,307		2,555,320
Operating lease right-of-use assets		—		22,786
Operating lease right-of-use asset						53,026		—
Equity investment		6,980,111		6,389,869		6,789,772		6,863,517
Land held for development		2,303,010		3,116,771		1,229,475		2,303,010
Property, plant, and equipment, net		34,508,390		34,360,586
Land, buildings, and equipment, net						39,012,223		36,491,660
Total long-term assets		59,219,871		58,667,686		63,832,358		61,576,618
TOTAL ASSETS	$	92,749,931	$	83,062,455	$	101,237,754	$	92,276,179

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	3,954,580	$	2,306,431	$	3,512,863	$	3,368,683
Card Casino accruals		2,696,641		3,257,277
Casino accruals						2,687,596		2,684,444
Accrued wages and payroll taxes		2,252,008		1,769,578		2,396,327		1,814,879
Cash dividend payable		341,082		—		345,369		341,602
Accrued property taxes		971,499		774,324		532,891		795,646
Deferred revenue		572,420		733,292		366,999		413,442
Payable to horsepersons		1,480,991		923,423		225,798		993,529
Current portion of operating lease obligations						25,352		—
Current portion of finance lease obligations		25,865		27,062		1,570		18,973
Current portion of operating lease obligations		—		22,786
Total current liabilities		12,295,086		9,814,173		10,094,765		10,431,198

LONG-TERM LIABILITIES
Deferred income taxes		7,684,915		7,671,015		8,250,015		7,474,015
Investee losses in excess of equity investment		2,671,561		1,205,068		2,550,187		3,185,923
Operating lease obligations, net of current portion						27,674		—
Finance lease obligations, net of current portion		—		18,973		8,184		—
Total long-term liabilities		10,356,476		8,895,056		10,836,060		10,659,938
TOTAL LIABILITIES		22,651,562		18,709,229		20,930,825		21,091,136

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized, 4,880,031 and 4,812,085 respectively, shares issued and outstanding		48,800		48,121
Common stock, $.01 par value, 10,000,000 shares authorized, 4,944,642 and 4,888,975 respectively, shares issued and outstanding						49,446		48,890
Additional paid-in capital		25,549,302		24,894,571		26,879,814		25,914,644
Retained earnings		44,500,267		39,410,534		53,377,669		45,221,509
Total stockholders’ equity		70,098,369		64,353,226		80,306,929		71,185,043
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	92,749,931	$	83,062,455	$	101,237,754	$	92,276,179

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*						*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*			*2023*			*2022*			*2023*			*2022*
OPERATING REVENUES:
Card Casino	$	10,039,527		$	10,452,206		$	30,394,387		$	27,207,088
Casino													$	10,224,216		$	10,039,527		$	30,322,149		$	30,394,387
Pari-mutuel		4,730,827			4,300,570			9,599,070			8,999,154			3,405,010			4,730,827			7,009,710			9,599,070
Food and beverage		3,913,320			3,475,027			7,150,715			5,119,588			3,310,759			3,913,320			6,808,242			7,150,715
Other		3,608,729			3,119,531			6,560,477			5,118,864			2,328,564			3,608,729			4,769,694			6,560,477
Total Net Revenues		22,292,403			21,347,334			53,704,649			46,444,694			19,268,549			22,292,403			48,909,795			53,704,649

OPERATING EXPENSES:
Purse expense		2,979,947			2,906,225			6,931,243			6,346,172			2,594,270			2,979,947			6,034,508			6,931,243
Minnesota Breeders’ Fund		323,156			318,938			874,464			808,096			308,038			323,156			822,797			874,464
Other pari-mutuel expenses		212,102			231,358			740,282			755,120			210,212			212,102			691,519			740,282
Salaries and benefits		6,860,590			6,399,950			18,881,258			16,054,814			7,245,775			6,860,590			19,922,853			18,881,258
Cost of food and beverage and other sales		1,365,748			1,178,346			2,771,338			1,938,677			1,161,665			1,365,748			2,567,561			2,771,338
Depreciation and amortization		747,267			730,164			2,234,790			2,113,917			831,379			747,267			2,308,272			2,234,790
Utilities		654,000			633,009			1,425,074			1,299,688			568,022			654,000			1,366,742			1,425,074
Advertising and marketing		1,567,163			1,095,788			2,739,638			1,525,844			887,197			1,567,163			1,817,180			2,739,638
Professional and contracted services		1,571,128			1,533,804			3,781,005			3,372,138			2,284,181			1,571,128			4,857,229			3,781,005
Gain on disposal of assets														(19,265	)		-			(19,265	)		-
Other operating expenses		1,602,933			1,933,761			3,800,281			3,743,240			1,390,339			1,602,933			4,117,388			3,800,281
Total Operating Expenses		17,884,034			16,961,343			44,179,373			37,957,706			17,461,813			17,884,034			44,486,784			44,179,373
Gain on sale/transfer of land		-			-			12,151			263,581
Gain on sale of land														-			-			6,489,976			12,151
INCOME FROM OPERATIONS		4,408,369			4,385,991			9,537,427			8,750,569			1,806,736			4,408,369			10,912,987			9,537,427
OTHER (LOSS) INCOME
Loss from equity investment		(500,143	)		(685,741	)		(1,274,058	)		(1,964,321	)
OTHER INCOME (LOSS)
(Loss) gain from equity investment														(674,341	)		(500,143	)		561,991			(1,274,058	)
Interest income, net		222,671			180,357			620,811			524,757			536,904			222,671			1,433,353			620,811
Net Other Loss		(277,472	)		(505,384	)		(653,247	)		(1,439,564	)
Net Other (Loss) Income														(137,437	)		(277,472	)		1,995,344			(653,247	)
INCOME BEFORE INCOME TAXES		4,130,897			3,880,607			8,884,180			7,311,005			1,669,299			4,130,897			12,908,331			8,884,180
INCOME TAX EXPENSE		(1,209,777	)		(1,123,209	)		(2,434,078	)		(2,133,030	)		(533,000	)		(1,209,777	)		(3,709,000	)		(2,434,078	)
NET INCOME	$	2,921,120		$	2,757,398		$	6,450,102		$	5,177,975		$	1,136,299		$	2,921,120		$	9,199,331		$	6,450,102

Basic earnings per share	$	0.60		$	0.58		$	1.33		$	1.09		$	0.23		$	0.60		$	1.87		$	1.33
Diluted earnings per share	$	0.60		$	0.58		$	1.32		$	1.09		$	0.23		$	0.60		$	1.86		$	1.32
Weighted average basic shares outstanding		4,872,674			4,786,283			4,845,743			4,769,201			4,933,961			4,872,674			4,913,560			4,845,743
Weighted average diluted shares		4,901,189			4,786,283			4,879,803			4,769,203			4,950,524			4,901,189			4,941,100			4,879,803
Cash dividends declared per share	$	0.07		$	0.00		$	0.28		$	0.00		$	0.07		$	0.07		$	0.21		$	0.28

	*Number of*		*Common*		*Additional*		*Retained*
	*Shares*		*Stock*		*Paid-in Capital*		*Earnings*			*Total*
Balance at June 30, 2023		4,933,844	$	49,338	$	26,538,005	$	52,586,742		$	79,174,085

Stock-based compensation		—		—		132,436		—			132,436
Dividend declared		—		—		—		(345,372	)		(345,372	)
401(k) stock match		10,798		108		209,373		—			209,481
Net income		—		—		—		1,136,299			1,136,299

Balance at September 30, 2023		4,944,642	$	49,446	$	26,879,814	$	53,377,669		$	80,306,929

	*Number of*		*Common*		*Additional*			*Retained*
	*Shares*		*Stock*		*Paid-in Capital*			*Earnings*			*Total*
Balance at December 31, 2022		4,888,975	$	48,890	$	25,914,644		$	45,221,509		$	71,185,043

Stock-based compensation		—		—		398,269			—			398,269
Dividend declared		—		—		—			(1,043,171	)		(1,043,171	)
401(K) stock match		28,597		286		644,287			—			644,573
Issuance of deferred stock awards		22,197		221		(171,970	)		—			(171,749	)
Shares issued under Employee Stock Purchase Plan		4,873		49		94,584			—			94,633
Net income		—		—		—			9,199,331			9,199,331

Balance at September 30, 2023		4,944,642	$	49,446	$	26,879,814		$	53,377,669		$	80,306,929

Number of

Common

Additional

Retained

Shares

Stock

Paid-in Capital

Earnings

Total

Balance at December 31, 2021
4,812,085 $ 48,121 $ 24,894,571 $ 39,410,534 $ 64,353,226

Stock-based compensation
— — 325,152 — 325,152
Dividend declared
— — — (1,360,369 ) (1,360,369 )
401(k) stock match
21,191 212 470,100 — 470,312
Issuance of deferred stock awards
41,816 418 (213,026 ) — (212,608 )
Shares issued under Employee Stock Purchase Plan
4,939 49 72,505 — 72,554
Net income
— — — 6,450,102 6,450,102

Balance at September 30, 2022
4,880,031 $ 48,800 $ 25,549,302 $ 44,500,267 $ 70,098,369

Number of

Common

Additional

Retained

Shares

Stock

Paid-in Capital

Earnings

Total

Balance at June 30, 2021
4,786,173 $ 47,861 $ 24,200,481 $ 30,032,958 $ 54,281,300

Exercise of stock options
— — — — —
Stock-based compensation
— — 130,623 — 130,623
Dividend distribution
— — — — —
401(k) stock match
10,080 101 173,476 — 173,577
Issuance of deferred stock awards
— — — — —
Shares issued under Employee Stock Purchase Plan
— — — — —
Net income
— — — 2,757,398 2,757,398

Balance at September 30, 2021
4,796,253 $ 47,962 $ 24,504,580 $ 32,790,356 $ 57,342,898

	*Nine Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2023*			*2022*
Operating Activities:
Net income	$	6,450,102		$	5,177,975		$	9,199,331		$	6,450,102
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,234,790			2,113,917			2,308,272			2,234,790
Stock-based compensation expense		325,152			400,215			398,269			325,152
Stock-based employee match contribution		470,312			396,727			644,573			470,312
Gain on disposal of assets								(19,265	)		—
Gain on sale of land								(6,489,976	)		(12,151	)
Deferred income taxes		13,900			—			776,000			13,900
Gain on sale of land		(12,151	)		(263,581	)
Loss from equity investment		1,274,058			1,964,321
(Gain) loss from equity investment								(561,991	)		1,274,058
Changes in operating assets and liabilities:
Accounts receivable		(1,499,353	)		(1,755,688	)		(1,001,522	)		(1,499,353	)
Employee retention credit		211,232			—			6,103,236			211,232
TIF receivable		(501,306	)		(461,844	)
Inventory and prepaid expenses		78,221			(80,753	)
Increase in TIF receivable								(502,644	)		(501,306	)
Inventory, prepaid expenses and deposits								96,360			78,221
Income taxes receivable/payable and prepaid income taxes		(1,286,931	)		1,235,511			(374,000	)		(1,286,931	)
Operating lease right-of-use assets		22,786			22,272
Operating lease right-of-use asset								24,524			22,786
Operating lease liabilities		(22,786	)		(22,272	)		(24,524	)		(22,786	)
Accounts payable		1,595,149			580,871			116,379			1,595,149
Deferred revenue		(160,872	)		408,358			(46,443	)		(160,872	)
Card Casino accruals		(560,636	)		542,250
Casino accruals								3,152			(560,636	)
Accrued wages and payroll taxes		482,430			902,895			581,448			482,430
Accrued property taxes		197,175			167,042			(262,755	)		197,175
Payable to horsepersons		557,568			(1,336,933	)		(767,731	)		557,568
Net cash provided by operating activities		9,868,841			9,991,283			10,200,693			9,868,841

Investing Activities:
Additions to land, buildings, and equipment		(2,663,322	)		(2,582,770	)		(5,577,116	)		(2,663,322	)
Proceeds from disposal of assets								22,500			—
Proceeds from sale of land		1,159,640			2,288,952			8,336,359			1,159,640
Additions for TIF eligible improvements		(31,697	)		(8,907	)		(4,160	)		(31,697	)
Equity investment contributions		(397,807	)		—			—			(397,807	)
Increase in related party receivable		(145,041	)		(489,859	)		(382,987	)		(145,041	)
Net cash used in investing activities		(2,078,227	)		(792,584	)
Proceeds from sale of short term investments								500,000			—
Net cash provided by (used in) investing activities								2,894,596			(2,078,227	)

Financing Activities:
Proceeds from issuance of common stock		72,554			102,450			94,633			72,554
Cash dividend paid to shareholders		(1,019,288	)		(1,706	)		(1,039,404	)		(1,019,288	)
Payments for taxes related to net share settlement of equity awards		(212,608	)		(25,948	)		(171,749	)		(212,608	)
Principal payments on finance lease		(20,170	)		(19,193	)		(9,219	)		(20,170	)
Net cash (used in) provided by financing activities		(1,179,512	)		55,603
Net cash used in financing activities								(1,125,739	)		(1,179,512	)

Net increase in cash, cash equivalents, and restricted cash		6,611,102			9,254,302			11,969,550			6,611,102

Cash, cash equivalents, and restricted cash at beginning of period		15,598,753			4,471,712			16,106,003			15,598,753

Cash, cash equivalents, and restricted cash at end of period	$	22,209,855		$	13,726,014		$	28,075,553		$	22,209,855

Business – Canterbury Park Holding Corporation’s (the “Company,” “we,” “our,” or “us”) Racetrack operations are conducted at facilities located in Shakopee, Minnesota, approximately 25 miles southwest of downtown Minneapolis. In May 1994, the Company commenced year-round horse racing simulcast operations and hosted the first annual live race meet during the summer of 1995. The Company’s live racing operations are a seasonal business, as it typically hosts live race meets each year from May until September. The Company earns additional pari-mutuel revenue by televising its live racing to out-of-state racetracks around the country. Canterbury Park’s ~~Card~~ Casino typically operates 24 hours a day, seven days a week and is limited by Minnesota State law to conducting card play on a maximum of 80 tables. The ~~Card~~ Casino currently offers a variety of poker and table games. The Company’s three largest sources of revenues are from ~~Card~~ Casino operations, pari-mutuel operations, and food and beverage sales. The Company also derives revenues from related services and activities, such as admissions, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. Additionally, the Company is developing underutilized land surrounding the Racetrack in a project known as Canterbury Commons™, with approximately 140 acres originally designated as underutilized. The Company has obtained and is pursuing several mixed-use development opportunities for this land, directly and through joint ventures.

Basis of Presentation and Preparation – The accompanying condensed consolidated financial statements include the accounts of the Company (Canterbury Park Holding Corporation and its direct and indirect subsidiaries Canterbury Park Entertainment, LLC; Canterbury Park Concessions, Inc.; and Canterbury Development, LLC). Intercompany accounts and transactions have been eliminated. The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto for the fiscal year ended December 31, ~~2021,~~2022, included in its Annual Report on Form 10-K (the “~~2021~~2022 Form 10-K”).

The condensed consolidated balance sheets and the related condensed consolidated statements of operations, stockholders’ equity, and the cash flows for the periods ended September 30, ~~2022~~2023 and ~~2021~~2022 have been prepared by Company management. In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, statement of stockholders’ equity, and cash flows at September 30, ~~2022~~2023 and ~~2021~~2022 and for the periods then ended have been made.

Summary of Significant Accounting Policies – A detailed description of our significant accounting policies can be found in our most recent Annual Report on the ~~2021~~2022 Form 10-K. There were no material changes in significant accounting policies during the three and nine months ended September 30, ~~2022~~2023.

~~Reclassifications~~ ~~- Certain amounts in prior period financial statements have been reclassified to conform to current period presentations.~~

Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, and amounts accumulated in card game progressive jackpot pools, the player pool and poker promotional fund to be used to repay card players in the form of promotions, giveaways, prizes, or by other means.

Accounts Receivable - We evaluate our allowance for credit losses and estimate collectability of current and non-current accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. The Company does not have accounts receivable with original maturities greater than one year. The allowance for credit losses and activity as of September 30, 2023 and December 31, 2022 was not material.

Employee Retention Credit ("ERC") – The Company qualified for federal government assistance through ERC provisions of the CARES Act passed in 2020, for the 2020 second, third, and fourth quarters, as well as the 2021 first and second quarters. The purpose of the ERC is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the coronavirus outbreak. We recognize amounts to be refundable as tax credits if there is a reasonable assurance of compliance with grant conditions and receipt of credits. AsDuring the first nine months of 2023, the Company received the payments in full and as of September 30, 2023 and December 31, 2022, the Company's expected one-time refunds totaling $0 and $6,103,236, respectively, are included on the Condensed Consolidated Balance Sheets as an employee retention credit receivable. The Company recorded ~~this amount~~$6,103,236 on the Consolidated Statements of Operations as a credit to salaries and benefits expense in the 2021 fourth quarter.

Deferred Revenue – Deferred revenue includes advance sales related to racing, events and corporate partnerships. Revenue from these advance billings is recognized when the related event occurs or services have been performed. ~~Deferred revenue also includes advanced Cooperative Marketing Agreement (“CMA”) promotional funds, for which revenue is recognized when expenses are incurred.~~

Payable to Horsepersons - The Minnesota Pari-mutuel Horse Racing Act requires the Company to segregate a portion of funds (recorded as purse expense in the statements of operations) received from ~~Card~~ Casino operations and wagering on simulcast and live horse races, for future payment as purses for live horse races or other uses of the horsepersons’ association. Pursuant to an agreement with the Minnesota Horsemen’s Benevolent and Protective Association (“MHBPA”), the Company transferred into a trust account or paid directly to the MHBPA, $~~5,877,000~~6,174,000 and ~~$6,566,000~~$5,877,000 for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022, respectively, related to thoroughbred races. Minnesota Statutes provide that amounts transferred into the trust account are the property of the trust and not of the Company, and therefore these amounts are not recorded on the Company’s Condensed Consolidated Balance Sheet.

Revenue Recognition – The Company’s primary revenues with customers consist of ~~Card~~ Casino operations, pari-mutuel wagering on simulcast and live horse races, and food and beverage transactions. We determine revenue recognition through the following steps:

The transaction price for a ~~Card~~ Casino contract is a set percentage of wagers and is recognized at the time that the wagering process is complete. The transaction price for pari-mutuel wagering is the commission received on a wager, exclusive of any track fees and is recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state’s racing regulatory body. The transaction price for food and beverage contracts is the net amount collected from the customer for these goods. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price is recorded as revenue as the good is transferred to the customer when delivery is made.

Contracts for ~~Card~~ Casino operations and pari-mutuel wagering involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who do not participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as these wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from what would result if the guidance were applied on an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone redemption value of the points earned, which is determined by the value of a point that can be redeemed for a cash voucher, food and beverage voucher, racing admission, valet parking, or racing forms. Based on past experience, the majority of customers redeem their points for cash vouchers. Therefore, there are no further performance obligations by the Company.

We have two general types of liabilities related to contracts with customers: (1) our MVP Loyalty Program and (2) outstanding chip liability. These are included in the line item ~~Card~~ Casino accruals on the consolidated balance sheet. We defer the full retail value of these complimentary reward items until the future revenue transaction occurs.

The Company offers certain promotional allowances at no charge to patrons who participate in its player rewards program.

We evaluate our on-track revenue, export revenue (as described below), and import revenue (as described below) contracts to determine whether we are acting as the principal or as the agent when providing services, to determine if we should report revenue on a gross or net basis. An entity acts as a principal if it controls a specified service before that service is transferred to a customer.

For on-track revenue and “import revenue,” that is revenue we generate for racing held elsewhere that our patrons wager on, we are entitled to retain a commission for providing a wagering service to our customers. For these arrangements, we are the principal because we control the wagering service; therefore, any charges, including simulcast fees, we incur for delivering the wagering service are presented as operating expenses.

For “export revenue,” when the wagering occurs outside our premises, our customer is the third-party wagering site such as a racetrack, Off Track Betting (“OTB”), or advance deposit wagering (“ADW”) provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the third-party wagering site.

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~the Company recorded as other revenue $515,000 of COVID-~~19 relief grants, including a lump sum grant of $500,000 from the Convention Center Relief Grant Program, which is overseen by the Minnesota Department of Employment and Economic Development. There were no grants received in the ~~nine~~ ~~months ended~~ ~~September 30, 2022.~~

The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. ~~Currently, there are no awards outstanding as of~~ ~~September 30, 2022.~~ Beginning in 2020, and as a result of the COVID-19 ~~Pandemic,~~pandemic, the Company temporarily suspended the granting of performance awards under its LTI Plan, and instead granted deferred stock awards designed to retain NEOs and other ~~Senior Executives~~senior executives in lieu of LTI Plan awards ~~for~~from 2020 through 2023. In February 2022, the Compensation Committee made determinations regarding the achievement of 2021 performance goals and payouts under the ~~2022.~~2019-2021 LTI Plan, which completed the performance period and awards under the 2019-2021 LTI Plan, and the last outstanding awards under the LTI Plan. Accordingly, there are no awards outstanding under the LTI Plan.

Board of Directors Stock ~~Option,~~Options, Deferred Stock Awards, and Restricted Stock Grants

The Company’s Stock Plan currently authorizes annual grants of restricted stock, deferred stock, stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual shareholders’ meeting as determined by the Board prior to each such meeting. Deferred stock awards represent the right to receive shares of the Company's common stock upon vesting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants to non-employee directors generally vest 100% one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting. The unvested deferred stock awards outstanding as of September 30, ~~2022~~2023 to our non-employee directors ~~consiste~~dconsists of ~~5,512~~only the grant of deferred stock on June 1, 2023 of 7,818 shares with a weighted average fair value per share of ~~$21.76.~~$23.01. There were no unvested restricted stock or stock options outstanding to any non-employee director at September 30, ~~2022~~2023.

The Company's Stock Plan permits its Compensation Committee to grant stock-based awards, including deferred stock awards, to key employees and non-employee directors. The Company has made deferred stock grants to key employees that vest over one to four years. Deferred stock awards represent the right to receive shares of the Company's common stock upon vesting.

During the ninemonths ended September 30, 2023, the Company granted employees deferred stock awards totaling 19,020 shares of common stock, with a vesting term of approximately four years and a fair value of $25.52 per share. During the nine months ended September 30, 2022, the Company granted employees deferred stock awards totaling 18,600 shares of common stock, with a vesting term of approximately four years and a fair value of $21.62 per share. ~~During the~~ ~~nine~~ ~~months ended~~ ~~September~~ ~~30,~~~~2021,~~ ~~the Company granted employees deferred stock awards totaling 27,900 shares of common stock, with a vesting term of approximately~~ ~~three~~ ~~years and a fair value of $13.33 per share.~~

Employee deferred stock transactions during the nine months ended September 30, 2023~~30,~~~~2022~~ are summarized as follows:

There were no stock options outstanding to any employee or other person at September 30, 2023. Stock-based compensation expense related to the LTI Plan, deferred stock awards, and restricted stock awards is included on the Condensed Consolidated Statements of Operations and totaled approximately ~~$325,000~~$398,000 and ~~$400,000~~$325,000 for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022. At September 30, 2023, ~~30,~~~~2022,~~there was approximately ~~$555,000~~$744,000 of total unrecognized stock-based compensation expense related to unvested employee and board of director deferred stock awards that is expected to be recognized over a period of approximately 3.5 years.

The following is a reconciliation of the numerator and denominator of the earnings per common share computations for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022:

The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The line of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. The maturity date of the revolving line of credit is January 31, 2024. ~~As of~~ ~~September 30, 2022~~~~, the~~The outstanding balance on the line of credit was $0.0 at both September 30, 2023 and December 31, 2022.

The Company has four reportable operating segments: horse racing, ~~Card~~ Casino, food and beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The ~~Card~~ Casino segment represents operations of Canterbury Park’s ~~Card~~ Casino. The food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the ~~Card~~ Casino, and during special events. The development segment represents our real estate development operations. The Company’s reportable operating segments are strategic business units that offer different products and services. They are managed separately because the segments differ in the nature of the products and services provided as well as process to produce those products and services. The Minnesota Racing Commission regulates the horse racing and ~~Card~~ Casino segments.

Depreciation, interest, and income taxes are allocated to the segments, but no allocation is made to the food and beverage segment for shared facilities. However, the food and beverage segment pays approximately 25% of gross revenues earned on live racing and special event days to the horse racing segment for use of the facilities. Starting in 2020, the food and beverage segment has not paid a commission related to live racing to the horse racing segment subsequent to the Company's first temporary shutdown of operations starting March 16, 2020.

The following tables represent a disaggregation of revenues from contracts with customers along with the Company’s operating segments (in 000’s):

The following are reconciliations of reportable segment revenues, income before income taxes, and assets, to the Company’s consolidated totals (in 000’s):

~~The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community (“SMSC”), which became effective~~ ~~March~~ 4,~~2012,~~ ~~was amended in the~~ ~~first~~ ~~quarter of each of~~ ~~2015,~~~~2016,~~~~2017,~~~~2018,~~ ~~and in~~ ~~June 2020 (~~~~as described below in Note~~ 7~~) and is scheduled to terminate on~~ ~~December~~ ~~31,~~~~2022.~~ The CMA contains certain covenants that, if breached, would trigger an obligation to repay a specified amount related to such covenant. At this time, management believes it unlikely that any breach of a covenant will occur, and that therefore the possibility that the Company will be required to pay the specified amount related to any covenant breach is remote.

Effective on December 21, 2021, the Company entered into a Contribution and Indemnity Agreement ("Indemnity Agreement") with affiliates of Doran Companies ("Doran") in connection with the debt refinancing on the Doran Canterbury I, LLC joint venture. Under the Indemnity Agreement, the Company is obligated to indemnify Doran for loan payment amounts up to $5,000,000 only if the lender demands the loan guarantee by Doran. Effective on October 27, 2022, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $700,000.

The Company is periodically involved in various claims and legal actions arising in the normal course of business. Management believes that the resolution of any pending claims and legal actions at September 30, ~~2022~~2023 and as of the date of this report, will not have a material impact on the Company’s consolidated financial positions or results of operations.

In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”). On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Redevelopment among the Master Developer, the City and the Authority, which is effective as of September 7, 2021. Under this contract, the Company is obligated to construct certain infrastructure improvements within the TIF District, and will be reimbursed for the cost of TIF eligible improvements by the City of Shakopee by future tax increment revenue generated from the developed property, up to specified maximum amounts. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed and will depend on future tax revenues generated from the developed property.

~~As discussed above in Note~~ 6, onOn March 4, 2012, the Company entered into ~~the CMA~~a Cooperative Marketing Agreement (the "CMA") with the ~~SMSC.~~Shakopee Mdewakanton Sioux Community ("SMSC"). The primary purpose of the CMA iswas to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this iswas achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments ~~have~~had no direct impact on the Company’s consolidated financial statements or operations.

Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits, and events.

As noted above and affirmed in the Fifth Amendment, SMSC was obligated to make an annual purse enhancement of $7,380,000 and an annual marketing payment of $1,620,000 for 2022.

The amounts earned from the marketing payments ~~are~~were recorded as a component of other revenue and the related expenses ~~are~~were recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three and nine months ended September 30, 2022, ~~30,~~~~2022,~~the Company recorded $977,000 and $1,764,000 in other revenue, incurred $916,000 and $1,603,000 in advertising and marketing expense, and incurred $61,000 and $161,000 in depreciation related to the SMSC marketing funds. ~~For~~The excess of amounts received over revenue is reflected as deferred revenue on the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September~~ ~~30,~~~~2021,~~ the Company recorded $1,003,000 and $1,415,000 in other revenue, incurred $962,000, and $1,326,000 in advertising and marketing expense, and incurred $41,000 and $117,000 in depreciation related to the SMSC marketing funds.Company’s consolidated balance sheets.

Under the CMA, the Company agreed for the term of the CMA ~~which is currently scheduled to terminate on~~ ~~December~~ ~~31,~~~~2022,~~ that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

The CMA expired by its terms on December 31, 2022. Accordingly, for the three and nine months ended September 30, 2023, there were no purse enhancement payments or marketing payments under the CMA.

On April 2, 2018, the Company’s subsidiary Canterbury Development LLC, entered into an Operating Agreement (“Operating Agreement”) with an affiliate of Doran Companies (“Doran”), a national commercial and residential real estate developer, as the two members of a Minnesota limited liability company named Doran Canterbury I, LLC (“Doran Canterbury I”). Doran Canterbury I was formed as part of a joint venture between Doran and Canterbury Development LLC to construct an upscale apartment complex on land adjacent to the Company’s Racetrack (the “Project”). ~~Doran Canterbury I has completed developing Phase I of the Project, which includes~~ ~~321~~ ~~units, a heated parking ramp, and a clubhouse.~~

On September 27, 2018, Canterbury Development LLC contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. On December 20, 2018, financing for Doran Canterbury I was secured. Doran Canterbury I has completed developing Phase I of the Project, which includes 321 units, a heated parking ramp, and a clubhouse. As the Company is able to assert significant influence, but not control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the three and nine months ended September 30, 2023, the Company recorded a loss of $650,000 and income of $636,000, respectively, on equity method investment related to this joint venture. The increased income for the firstnine months of 2023 related to this joint venture is due to the receipt of insurance proceeds related to an outstanding claim. For the three and nine months ended September 30, 2022, ~~30,~~~~2022,~~the Company recorded $455,000 and $1,466,000, respectively, in loss on equity method investments related to this joint venture. ~~For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September~~ ~~30,~~~~2021,~~ ~~the Company recorded $670,000 and $1,956,000, respectively, in loss on equity method investments related to this joint venture.~~ In accordance with U.S. GAAP, since we are committed to provide future ~~capital contributions~~member loans to Doran Canterbury I to cover the costs of construction or operating deficiencies, we also present as a liability in the accompanying Condensed Consolidated Balance Sheets the net balance recorded for our share of Doran Canterbury I's losses in excess of the amount funded into Doran Canterbury I, which was ~~$2,672,000~~ $2,550,000 and ~~$1,205,000~~$3,186,000 at September 30, 2023 ~~30,~~~~2022~~and December 31, ~~2021,~~2022, respectively. See Note 10 of Notes to Financial Statements for a summary of member loans to Doran Canterbury I.

In connection with the execution of the Amended Doran Canterbury I Agreement, on August 18, 2018, Canterbury Development LLC entered into an Operating Agreement with Doran Shakopee, LLC as the two members of a Minnesota limited liability company entitled Doran Canterbury II, LLC (“Doran Canterbury II”). The Operating Agreement was amended and restated by the members effective July 30, 2020. Under the Doran Canterbury II Operating Agreement, Doran Canterbury II will pursue development of Phase II of the Project. Phase II will include an additional 300 apartment units. Canterbury Development’s equity contribution to Doran Canterbury II for Phase II was approximately 10 acres of land, which were contributed to Doran Canterbury II on September 30, 2020. In connection with its contribution, Canterbury Development became a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%. As the Company is able to assert significant influence, but not control, over Doran Canterbury II’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. As of September 30, 2023, ~~30,~~~~2022,~~the proportionate share of Doran Canterbury II's earnings was immaterial. During the three and ninemonths ended September 30, ~~30,~~~~2022,~~the Company ~~contributed approximately $0 and $398,000~~did not make any contributions as an equity investment contribution in Doran Canterbury II. During the three and nine months ended September 30, 2022, the Company contributed approximately $0 and $398,000, respectively, as an equity investment contribution in Doran Canterbury II. Under the Operating Agreement, we are required to provide future member loans to Doran Canterbury II to cover the costs of construction or operating deficiencies. See Note 10 of Notes to Financial Statements for a summary of member loans to Doran Canterbury II.

On June 16, 2020, Canterbury Development LLC, entered into an Operating Agreement with an affiliate of Greystone Construction, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC ("Canterbury DBSV"). Canterbury DBSV was formed as part of a joint venture between Greystone and Canterbury Development LLC for a multi-use development on the 13-acre land parcel located on the southwest portion of the Company’s racetrack. Canterbury Development LLC's equity contribution to Canterbury DBSV was approximately 13 acres of land, which were contributed to Canterbury DBSV on July 1, 2020. In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. As the Company is able to assert significant influence, but not control, over Canterbury DBSV’s operational and financial policies, the Company accounts for the joint venture as an equity method investment.For the three and ninemonths ended September 30, 2023, the Company recorded $24,000 and $76,000, respectively, in loss on equity method investments related to this joint venture. For the three and nine months ended September 30, 2022, ~~30,~~~~2022,~~the Company recorded a loss of $45,000 and income of $194,000, respectively, on equity investment related to this joint venture.

The following table summarizes changes to the Equity investment and Investee losses in excess of equity investment lines on our consolidated balance sheets for the nine months ended September 30, 2023:

On August 8, 2018, the City Council of the City of Shakopee, Minnesota approved a Contract for Private Redevelopment (“Redevelopment Agreement”) between the City of Shakopee Economic Development Authority (“Shakopee EDA”) and Canterbury Park Holding Corporation and its subsidiary Canterbury Development LLC in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. The City of Shakopee, the Shakopee EDA and the Company entered into the Redevelopment Agreement on August 10, 2018.

Under the Original Agreement, the Company agreed to undertake a number of specific infrastructure improvements within the TIF District, and the City agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. Under the Original Agreement, the total estimated cost of TIF eligible improvements to be borne by the Company was $23,336,500.

On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Private Redevelopment (the “First Amendment”) among the Company, the City of Shakopee, and the Shakopee EDA, which is effective as of September 7, 2021. Under the First Amendment and as part of the authorized changes regarding the responsibilities of the Company and the City, improvements on Unbridled Avenue will be primarily constructed by the City of Shakopee. As a result, the total estimated cost of TIF eligible improvements to be borne by the Company ~~will be~~was reduced by $5,744,000 to an amount not to exceed $17,592,881. In order to reimburse the Company for the qualified costs related to constructing the developer improvements, the Authority will issue and the Company will receive a TIF Note in the maximum principal amount of $17,592,881. The First Amendment also memorialized that the Company completed the Shenandoah Drive improvements as required prior to December 31, 2019. The City is obligated to issue bonds to finance the portion of the improvements required to be constructed by the City.

A detailed Schedule of the Public Improvements under the First Amendment, the timeline for their construction and the source and amount of funding is set forth in the First Amendment, which is filed as Exhibit 10.1 of the Form 8-K filed on January 31, 2022. The Company expects to substantially complete the remaining ~~Developer Improvements~~developer improvements by July 17, 2027 and will be reimbursed for costs of the ~~Developer Improvements~~developer improvements incurred by no later than July 17, 2027. The total amount of funding that the Company will be paid as reimbursement under the TIF program for these improvements is not guaranteed, however, and will depend in part on future tax revenues generated from the developed property.

As of September 30, 2023, ~~30,~~~~2022,~~the Company recorded a TIF receivable of approximately ~~$13,036,000,~~$13,801,000, which represents ~~$11,211,000~~$11,305,000 of principal and ~~$1,825,000~~$2,496,000 of interest. Management believes future tax revenues generated from current development activity will exceed the Company's development costs and thus, management believes no allowance related to this receivable is necessary. As of December 31, ~~2021,~~2022, the Company recorded a TIF receivable of approximately ~~$12,503,000,~~$13,294,000, which represented ~~$11,180,000~~$11,301,000 of principal and ~~$1,323,000~~$1,993,000 of interest.

The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.

On ~~April 7, 2020,~~ ~~the Company entered into an agreement to sell approximately 11.3 acres of land on the west side of the Racetrack to a~~ ~~third~~ ~~party for total consideration of approximately $2,400,000. The Company closed on the~~ ~~first~~ ~~phase of this transaction in~~ ~~April 2021,~~ ~~which totaled approximately 7.4 acres of land for proceeds of approximately $1,200,000. On~~ ~~May 20, 2022,~~ ~~the Company closed on the~~ ~~second~~ ~~phase of this transaction, which totaled approximately 4 acres of land for proceeds of approximately $1,200,000.~~

The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases some office equipment under finance leases. We also lease equipment related to our horse racing operations under operating leases. For lease accounting purposes, we do not separate lease and nonlease components, nor do we record operating or finance lease assets and liabilities for short term leases.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We recognize expense for operating leases on a straight-line basis over the lease term. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants.

Lease costs related to operating leases were ~~$22,855~~$26,785 and ~~$22,339~~$22,855 for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022. The total lease expenses for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or liability was ~~$411,354~~$378,134 and ~~$350,960~~$411,354 for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022, respectively.

Lease costs included in depreciation and amortization related to our finance leases were $18,708 ~~and $11,898~~ for both the nine months ended September 30, 2023 ~~30,~~and 2022 ~~and~~ ~~2021,~~ ~~respectively.~~. Interest expense related to our finance leases was immaterial.

The following table shows the classification of the right of use assets on our consolidated balance sheets:

1 – Finance lease assets are net of accumulated amortization of ~~$99,694~~$118,044 and ~~$79,524~~$106,586 as of September 30, 2023 ~~30,~~~~2022~~and December 31, ~~2021,~~2022, respectively.

The following table shows the lease terms and discount rates related to our leases:

The maturity of operating leases and finance leases as of September 30, ~~2022~~2023 are as follows:

InSince 2019, ~~2020,~~~~2021,~~ ~~and through the~~ ~~first~~~~nine~~ ~~months of~~ ~~2022,~~the Company has made member loans to the Doran Canterbury I and the Doran Canterbury II joint ventures totaling approximately ~~$2,096,000.~~$2,485,000 and $2,269,000 as of September 30, 2023 and December 31, 2022, respectively. These member loans bear interest at the rate equal to the Prime Rate plus two percent per annum, and accrued interest totaled ~~$226,000~~$451,000 and $275,000 as of September 30, 2023 and ~~30,~~December 31, 2022, ~~2022.~~respectively. The Company expects to be fully reimbursed for these member loans as and when the joint ventures achieve positive cash flow. Under the Operating Agreements for Doran Canterbury I and Doran Canterbury II, the joint ventures must repay member loans before payments to members in accordance with their percentage interests.

The Company has also recorded related party receivables of approximately $2,000 and $11,000 as of September 30, 2023 and December 31, 2022, respectively, for various related costs incurred by the Company. The Company expects to be fully reimbursed for these costs by the related parties in ~~2022.~~2023.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Canterbury Park Holding Corporation and its subsidiaries, our operations, our financial results and financial condition and our present business environment. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the financial statements (the “Notes”).

Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) conducts pari-mutuel wagering operations and hosts “unbanked” card games at its Canterbury Park Racetrack and ~~Card~~ Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 25 miles southwest of downtown Minneapolis. The Racetrack is the only facility in the State of Minnesota that offers live pari-mutuel thoroughbred and quarter horse racing.

The Company’s pari-mutuel wagering operations include both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May through September, and year-round wagering on races held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other, are hosted in the ~~Card~~ Casino at the Racetrack. The ~~Card~~ Casino typically operates 24 hours a day, seven days a week. The ~~Card~~ Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as concessions, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

In January 2020, an outbreak of a respiratory illness caused by a new strain of coronavirus was identified. The disease has since spread rapidly across the world, causing the World Health Organization to declare the outbreak a pandemic (the “COVID-19 Pandemic”) on March 12, 2020. Since that time, governments and businesses have taken measures to limit the impact of the COVID-19 Pandemic, including the issuance of shelter-in-place orders, social distancing measures, travel bans and restrictions, and business shutdowns.

As a result of the COVID-19 Pandemic, the Company temporary suspended all Card Casino, simulcast, food and beverage, and special events operations at Canterbury Park from March 16, 2020 through June 9, 2020 and from November 21, 2020 through January 10, 2021. Canterbury Park re-opened on January 11, 2021 with a capacity limitation of 150 guests per designated area; the capacity limitation was subsequently increased on February 13, 2021 to 250 guests per designated area.

In connection with reopening our pari-mutuel, food and beverage, and Card Casino operations, we adhered to social distancing requirements, which included reduced seating at table games and poker and capacity limitations to follow Minnesota state guidelines. Effective May 28, 2021, all capacity limits, restrictions on large gatherings, and other restrictions, which had been implemented in response to the impact of the COVID-19 Pandemic, were lifted and our Racetrack began operating operated under pre-pandemic guidelines. Our Card Casino also began operating without capacity restrictions effective May 28, 2021, but we maintained and intend to maintain certain operational changes and improvements initiated in 2020 in response to the COVID-19 Pandemic.

The disruptions arising from the COVID-19 Pandemic had a negative impact on the Company's financial condition and operations for the first half of 2021. However, the Company's revenues began to recover starting in the 2021 second quarter. The strong recovery we experienced in 2021 was a result of increased consumer confidence, reduction in capacity restrictions, and faster than anticipated vaccine roll-outs, as well as the success of initiatives begun during the COVID-19 Pandemic to increase attendance at live racing and other events, enhance the player experience, and recruit higher value players. Although the Company has currently appeared to recover from the effects of the COVID-19 Pandemic, the pandemic has caused other global issues that could have a future adverse effect on the Company. Specifically, these issues relate to supply chain issues and labor shortages, which have had some negative impact on our business and may continue to have an impact in the near future. Additionally, the spread of any new COVID-19 variants has had and may in the future have an adverse effect on the Company's financial condition and results. As the impact of the COVID-19 Pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

Operations Review for the Three and Nine Months Ended September 30, ~~2022:~~2023:

Total net revenues for the three months ended September 30, ~~2022~~2023 were ~~$22,292,000, an increase~~$19,269,000, a decrease of ~~$945,000,~~$3,024,000, or ~~4.4%~~13.6%, compared to total net revenues of ~~$21,347,000~~$22,292,000 for the three months ended September 30, ~~2021~~.2022. Total net revenues for the nine months ended September 30, ~~2022~~2023 were ~~$53,705,000, an increase~~$48,910,000, a decrease of ~~$7,260,000,~~$4,795,000, or ~~15.6%~~8.9%, compared to total net revenues of ~~$46,445,000~~$53,705,000 for the nine months ended September 30, ~~2021.~~ 2022. See below for a further discussion of our sources of revenues.

Total pari-mutuel revenue increased $430,000, or 10.0%, and $600,000. or 6.7%, for the three and nine months ended September 30, 2022, respectively, compared to the same respective periods in 2021. The increase is primarily due to increased live and out-of-state handle on our live racing product along with an overall increase in business levels, including the fact that we have returned to normalized operations and full capacity as compared to the closure of our operations for 10 days in January 2021 and operating at a limited capacity upon reopening until May 2021.

The primary source of ~~Card~~ Casino revenue is a percentage of the wagers received from players as compensation for providing the ~~Card~~ Casino facility and services, which is referred to as “collection revenue.” Other Poker Revenue and Other Table Games Revenue presented above includes fees collected for the administration of tournaments and the poker jackpot and amounts earned as reimbursement of the administrative costs of maintaining table games jackpot funds, respectively.

Total pari-mutuel revenue decreased $1,326,000, or 28%, and $2,589,000, or 27%, for the three and nine months ended September 30, ~~2022~~ 2023, respectively, compared to the same periods in 2022. The decrease in pari-mutuel revenues is primarily due to a ~~lower collection revenue rate~~decrease in ~~table games. The increase~~live race days year-over-year (53 race days in ~~Card Casino revenue for the first nine months ended September 30, 2022 is primarily due~~2023 compared to ~~increased visitation as our business recovers from the effects of the COVID-19 Pandemic described above,~~64 race days in 2022) as well as ~~increased table games drop~~decreased guest fees from ~~the successful marketing efforts to recruit higher value players. The increase is also due to an increase in revenue generated from poker tournaments in the 2022 first nine months.~~out-state-handle on our live racing product.

Food and beverage revenue ~~increased $438,000,~~decreased $603,000, or ~~12.6%~~15.4%, and ~~$2,031,000,~~$342,000, or ~~39.7%~~4.8%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, compared to the same ~~respective~~ periods in ~~2021.~~2022. The ~~increases are~~decrease in food and beverage revenues for the three and nine month periods is primarily due to increased visitation and live racing attendance as our business recovers from the effects of the COVID-19 Pandemic described above. Furthermore, the increase is also attributable to hosting larger scale eventsTwin Cities Summer Jam not taking place in the ~~2022 first nine months, which is more consistent with our pre-COVID food and beverage operations.~~third quarter of 2023 as it did during the third quarter of 2022.

Other revenue ~~increased $489,000,~~decreased $1,280,000, or ~~15.7%~~35.5%, and ~~$1,442,000,~~$1,791,000, or ~~28.2%~~27.3%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, compared to the same ~~respective~~ periods in ~~2021.~~2022. The ~~increases~~decreases are primarily due to ~~increased visitation and live racing attendance~~the expiration of the SMSC agreement as ~~our business recovers~~funds received from the ~~effects of the COVID-19 Pandemic described above~~agreement were used and subsequently recorded in other revenues as well as ~~hosting larger scale events. Additionally, we recognized increased~~being recorded as operating, primarily advertising ~~revenue for~~and marketing, initiatives related to the Cooperative Marketing Agreement (the “CMA”) in the nine months ended September 30, 2022 compared to the same period in 2021, which saw capacity constraints and various restrictions continue through May 28, 2021. The increase is partially offset by the Company receiving $515,000 in COVID-19 relief grants in the 2021 first quarter.expenses.

Total operating expenses ~~increased $923,000,~~decreased $422,000, or ~~5.4%~~2.4%, and ~~$6,222,000~~increased $307,000, or ~~16.4%~~0.7%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, compared to the same ~~respective~~ periods in 2021. The increases reflect increases in nearly all of the Company's operating expenses, primarily as a result of the return to normalized operations in the three and nine months ending September 30, 2022 as compared to the prior year which included a temporary suspension of operations through January 10, 2021 and the limitations placed on operations upon reopening until May 2021.2022. The following paragraphs provide further detail regarding certain operating expenses.

Purse expense ~~increased $74,000,~~decreased $386,000, or ~~2.5%~~12.9%, and ~~$585,000,~~$897,000, or ~~9.2%~~12.9%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, compared to the same ~~respective~~ periods in ~~2021.~~2022. The ~~increases are~~decrease for the three months ended September 30, 2023 is primarily due to the ~~overall increases~~decrease in pari-mutuel revenues while the decrease for the nine months ended September 30, 2023 is primarily due to decreases of both pari-mutuel and ~~Card~~ Casino revenues.

Salaries and benefits increased ~~$461,000,~~$385,000, or ~~7.2%~~5.6%, and ~~$2,826,000,~~$1,042,000, or ~~17.6%~~5.5%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, compared to the same ~~respective~~ periods in ~~2021.~~2022. The ~~increases are~~increase is primarily due to an increase in the number of personnel to support our resumption of normalized operations in the three and nine months ended September 30, 2022 as well as the fact that the majority of employees were placed on an unpaid furlough during the first week of 2021. Additionally, to attract and retain front-line workers and get closer to full staffing levels, we have increased our wage-rate structure for seasonal as well as year-round ~~employees.~~employees to attract and retain front-line workers. The Company also increased its 401(k) match percentage, effective January 1, 2023.

Cost of food and beverage sales ~~increased $187,000,~~decreased $204,000, or ~~15.9%~~14.9%, and ~~$832,000,~~$204,000, or ~~42.9%~~7.4%, for the three and nine months ended September 30, ~~2022,~~ 2023, respectively, compared to the same ~~respective~~ periods in ~~2021.~~2022. The ~~increases are~~decrease is primarily due to the ~~increased~~decreased food and beverage revenue due to Twin Cities Summer Jam not taking place in 2023 as noted above.

Advertising and marketing costs decreased $680,000, or 43.4%, and $922,000, or 33.7%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The decrease is attributed to the expiration of the Cooperative Marketing Agreement mentioned above in the other revenues section.

Professional and contracted services increased $713,000, or 45.4%, and $1,076,000, or 28.5%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The increase in professional expense relates to long-term strategic growth initiatives being pursued as ~~well as inflation related increases to~~part of the execution on our ~~cost of goods.~~ five-year strategic plan focused on growing Casino revenue.

~~Advertising and marketing increased $471,000,~~Other operating expenses decreased $213,000, or ~~43.0%~~13.3%, and ~~$1,214,000,~~increased $317,000, or ~~79.5%~~8.3%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, compared to the same respective periods in 2021. The increases are primarily due to an increase in advertising spend for the first nine months of 2022 to be more consistent with historic levels and to target higher value players and higher visitation. Additionally, we incurred additional advertising expenses for marketing initiatives related to the CMA in the nine months ended September 30, 2022 compared to the same period in 2021, which saw capacity constraints and various restrictions continue through May 28, 2021.

~~Other operating expenses decreased $331,000, or 17.1%, and increased $57,000 or 1.5%, for the three and nine months ended September 30, 2022~~ compared to the same periods in ~~2021.~~2022. The decrease for the three months ended September 30, ~~2022~~2023 is primarily due to lower costs for promoter expenses related to our summer concert series. The increase for the nine months ended September 30, 2023 is primarily due to increased track maintenance costs, a settlement of a claim, and also the timing of ~~events as more events occurred throughout~~miscellaneous repairs and maintenance year-over-year.

Other loss, net, for the ~~year~~three months ended September 30, 2023 was $137,000, an increase of $140,000, compared to ~~date rather than~~ a ~~more condensed schedule~~net other loss of ~~special events in~~$277,000 for the ~~same period 2021~~three months ended September 30, 2022. Other income, net, for the nine months ended September 30, 2023 was $1,995,000, an increase of $2,649,000, compared to a net other loss of $653,000 for the nine months ended September 30, 2022. The increase for the nine months ended September 30, 2023 is primarily due to our share of insurance proceeds received on a claim by Doran Canterbury I. Also contributing to both the three and nine month increases was increased interest income due to the ~~lifting~~Company transferring available cash into certificates of ~~pandemic~~deposit and money market funds as well as increasing interest rates related ~~restrictions in May 2021.~~ to our member loans to Doran Canterbury I and Doran Canterbury II.

During the ~~2022~~2023 second quarter, the Company recorded a gain on sale of land of ~~$12,000~~$6,490,000 as a result of the sale of approximately 437 acres of land to an affiliate of Swervo Development for approximately ~~$1,200,000~~$8,800,000 in ~~gross proceeds.~~total consideration.

The Company recorded a provision for income taxes of ~~$1,210,000~~$533,000 and ~~$1,123,000~~$1,210,000 for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recorded a provision for income taxes of ~~$2,434,000~~$3,709,000 and ~~$2,133,000~~$2,434,000 for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The ~~increase~~decrease in our tax expense for the three months ended September 30, ~~2022~~2023 is primarily due to a ~~increase~~decrease in income before ~~taxes from operations.~~taxes. Our effective tax rate was 31.9% and 28.7% for the three and nine months ended September 30, 2023, respectively. Our effective tax rate was 29.3% and 27.4% for the three and nine months ended September 30, ~~2022. respectively. Our effective tax rate was 28.9% and 29.2% for the three and nine months ended September 30, 2021,~~2022, respectively. The small fluctuations in the effective tax rates are primarily the result of discrete items that occurred during the three and nine months ended September 30, ~~2022.~~2023.

The Company recorded net income of $1,136,000 and $9,199,000 for the three and nine months ended September 30, 2023, respectively. The Company recorded net income of $2,921,000 and $6,450,000 for the three and nine months ended September 30, 2022, ~~respectively. The Company recorded net income of $2,757,000 and $5,178,000 for the three and nine months ended September 30, 2021,~~ respectively.

To supplement our financial statements, we also provide investors with information about our EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure, which excludes certain items from net income, a GAAP measure. See the table below, which presents reconciliations of these measures to the GAAP equivalent financial measures. We define EBITDA as earnings before interest, income tax expense, and depreciation and amortization. We also compute Adjusted EBITDA, which reflects additional adjustments to Net Income to eliminate unusual or non-recurring items, as well as items relating to our real estate development operations and we believe the exclusion of these items allows for better comparability of our performance between ~~periods.~~periods and is useful in allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, excluding the impact of our real estate segment, and provides a perspective on the current effects of operating decisions relating to our core, non-real estate business. For the three and nine months ended September 30, ~~2022~~2023, Adjusted EBITDA excluded depreciation relating to equity investments, gain on sale of land and disposal of assets, a gain on insurance proceeds related to the equity investment in Doran Canterbury I, as well as depreciation and amortization relating to equity investments, and interest expense related to equity investments. Neither EBITDA nor adjusted EBITDA is a measure of performance calculated in accordance with GAAP and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance. EBITDA is presented as a supplemental disclosure because we believe that, when considered with measures calculated in accordance with GAAP, EBITDA and Adjusted EBITDA provide a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes, and it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA or Adjusted EBITDA information may calculate EBITDA or Adjusted EBITDA differently than we do.

The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and to adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022:

Adjusted ~~EBITDA increased $165,000~~EBITDA decreased $2,491,000, or 46.6%, and ~~$2,341,000~~$5,101,000, or 41.0%, for the three and nine months ended September 30, ~~2022,~~2023, respectively, as compared to the same ~~respective~~ periods in ~~2021.~~2022. The ~~increase~~decrease in Adjusted EBITDA is primarily due to ~~increased visitation~~decreased Pari-mutuel and ~~live-racing attendance~~Casino revenues noted above. Furthermore, for the nine months ended September 30, 2023, Adjusted EBITDA was reduced by insurance proceeds received by the Company's equity investment related to an insurance claim by the Doran Canterbury I, LLC joint venture as ~~COVID-19 Pandemic restrictions have been lifted and social distancing measures and operating capacity limitations have ceased. The increase is also due~~well as the gain on sale of land to ~~increased operational efficiencies that have been implemented since the COVID-19 Pandemic.~~Swervo Development, which were not present in other periods. For the three and nine months ended September 30, 2023, Adjusted EBITDA as a percentage of net revenue was 14.8% and 15.0%, respectively. For the three and nine months ended September 30, 2022, Adjusted EBITDA as a percentage of net revenue was 24.0% and 23.2%, respectively. ~~For the three and nine months ended September 30, 2021, Adjusted EBITDA as a percentage of net revenue was 24.2% and 21.8%, respectively.~~

The Company entered into the CMA with the Shakopee Mdewakanton Sioux Community, which became effective on March 4, 2012, and was amended in the respective first quarters of 2015, 2016, 2017, 2018, and June 2020 and is scheduled to terminate on December 31, 2022. The CMA contains specific covenants that, if breached, would trigger an obligation to repay a specified amount related to these covenants. At this time, management believes that the likelihood that the breach of a covenant would occur and that the Company would be required to pay the specified amount related to a covenant is remote.

The Company continues to analyze the feasibility of various options related to the development of our underutilized land. The Company may incur substantial costs during the feasibility and predevelopment process, but the Company believes available funds are sufficient to cover the near-term costs. See Liquidity and Capital Resources for more information on liquidity and capital resource requirements.

The Company's primary source of liquidity and capital resources have been and are expected to be cash flow from operations and cash available under our revolving line of credit. The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement which matures January 31, 2024. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The line of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. As of September 30, ~~2022~~2023, the outstanding balance on the line of credit was $0. The Company did not borrow on the revolving line of credit during the quarter ended September 30, 2023. As of September 30 ~~2022,~~, 2023, the Company was in compliance with the financial covenants of the general credit and security agreement.

The Company’s cash, cash equivalents, and restricted cash balance at September 30, ~~2022~~2023 was ~~$22,210,000~~$28,076,000 compared to ~~$15,599,000~~$16,106,000 as of December 31, ~~2021~~2022. The Company believes that unrestricted funds available in its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations and future land sales, will be sufficient to satisfy its ongoing liquidity and capital resource requirements for regular operations, as well as its planned development expenses for at least the next twelve months. ~~However,~~The Company intends to allocate substantially all of the net proceeds from the sale of the 37 acres of land to Bloomington Investments, LLC, an entity related to Swervo Development ("Swervo"), for total consideration of $8,800,000, to the redevelopment of the horse stabling area, which serves its racing business, with new barns and a new dormitory complex. The Company may seek additional financing to complete the redevelopment of the horse stabling area. In August 2023, the Company received approval for the first phase of the barn relocation and redevelopment plan, which is expected to take approximately one year to complete. Furthermore, if the Company engages in ~~any~~ additional significant real estate development, significant improvements to its facilities, the Racetrack or surrounding grounds, or strategic growth or diversification transactions, additional financing would more than likely be required and the Company may seek this additional financing through joint venture arrangements, through incurring debt, or through an equity financing, or a combination of any of these.

Trends in our operating cash flows tend to follow trends in operating income but can be affected by changes in working capital, the timing of significant interest payments, and tax payments or refunds. Net cash provided by operating activities for the nine months ended September 30, ~~2022~~2023 was ~~$9,610,000,~~$10,201,000, primarily as a result of the following: the Company reported net income of $9,199,000, depreciation of $2,308,000, deferred income taxes of $776,000, and stock-based compensation and 401(k) match totaling $1,043,000, offset by a gain from equity investment of $562,000 and a gain on land sale of $6,490,000. The Company experienced an increase in cash related to an employee retention credit receivable of $6,103,000, offset by a decrease in amounts payable to horsepersons of $768,000 and an increase in accounts receivable of $1,002,000 for the nine months ended September 30, 2023.

Net cash provided by operating activities for the nine months ended September 30, 2022 was $9,869,000, primarily as a result of the following: the Company reported net income of $6,450,000, depreciation of $2,235,000, a loss from equity investment of $1,274,000, and stock-based compensation and 401(k) match totaling $795,000. Primarily due to timing of our live racing season, the Company also experienced an increase in accounts payable of ~~$1,336,000~~$1,595,000 and an increase to payable to horsepersons of $558,000, offset by a decrease in accounts receivable of $1,499,000 and income taxes receivable and prepaid income taxes of $1,287,000 for the nine months ended September 30, 2022.

Net cash provided by ~~operating~~investing activities for the nine months ended September 30, ~~2021~~2023 was $9,991,000, primarily as a result of the following: The Company reported net income of $5,178,000, depreciation of $2,114,000, a loss from equity investment of $1,964,000, and stock-based compensation and 401(k) match totaling $797,000. The Company also experienced an increase in accrued wages and payroll taxes of $903,000 and a decrease in payable to horsepersons of $1,337,000 for the nine months ended September 30, 2021. The increase in accrued wages and payroll taxes is due to the timing of our payroll dates as well as the fact the Company's operations were temporarily suspended as of December 31, 2020 resulting in a reduction in payroll costs. The decrease in our payable to horsepersons is$2,895,000, primarily due to ~~timing.~~net proceeds received from the sale of land of $8,337,000, offset by $5,577,000 in additions to land, buildings, and equipment.

Net cash used in investing activities for the first nine months of 2022 was ~~$1,819,000,~~$2,078,000, primarily due to $2,663,000 in additions to land, buildings, equipment, and $398,000 in equity investment ~~contributions. Net cash provided by investing activities for the first nine months of 2021~~contributions, which was ~~$793,000 primarily due to additions to land, buildings, equipment and equity investments being~~ somewhat offset by ~~the~~$1,160,000 in net proceeds received from the sale of ~~land.~~land .

Net cash used in financing activities for the nine months ended September 30, 2023 was $1,126,000, primarily due to cash dividends paid to shareholders and payments for taxes of equity awards. The Company declared a cash dividend of $0.07 per share payable each quarter during the nine months ended September 30, 2023.

Net cash used in financing activities during the first nine months of 2022 was $1,180,000, primarily due to cash dividends paid to shareholders and payments for taxes of equity awards. ~~Net~~The Company declared a cash ~~provided by financing activities~~dividend of $0.14 per share payable during the first quarter followed by a $0.07 per share payable for the second and third quarters during the nine months ~~of 2021 was $56,000 due to proceeds from the issuance of common stock upon exercise of stock option awards, partially offset by payments for taxes of equity awards.~~ ended September 30, 2022.

The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change.

These accounting estimates are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Management made no changes to the Company’s critical accounting estimates during the quarter ended September 30, 2023. In applying its critical accounting estimates, management reassesses its estimates each reporting period based on available information. Changes in these estimates did not have a significant impact on earnings for the quarter ended September 30, 2023.

The development and selection of critical accounting estimates, and the related disclosures, have been reviewed with the Audit Committee of our Board of Directors. We believe the current assumptions and other considerations used to estimate amounts reflected in our Condensed Consolidated Financial Statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our Condensed Consolidated Financial Statements, the resulting changes could have a material adverse effect on our financial condition, results of operations and cash flows.

Estimate of the allowance for doubtful accounts - Property Tax Increment Financing "TIF" Receivable

As of September 30, ~~2022,~~2023, the Company recorded a TIF receivable on its Consolidated Balance Sheet of approximately ~~$13,036,000,~~$13,801,000, which represents ~~$11,211,000~~$11,305,000 of principal and ~~$1,825,000~~$2,496,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.

The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of potential uncollectability exist. The Company utilizes the assistance of a third party to assist with the projected tax increments. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if the future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis for the year ended December 31, ~~2021,~~2022, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary. There were no indicators of potential uncollectability infor the ~~quarter~~three and nine months ended September 30, ~~2022.~~2023.

~~Commitments and Contractual Obligations:~~Cooperative Marketing Agreement:

The Company entered into the CMA with the SMSC on June 4, 2012, that was amended in January 2015, 2016, 2017, March 2018, and June 2020 and is scheduled to terminate on December 31, 2022. See “Cooperative Marketing Agreement” below.

On June 4, 2012, the Company entered into ~~the CMA~~a Cooperative Marketing Agreement (the "CMA") with the SMSC. The primary purpose of the CMA iswas to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this iswas achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments ~~have~~had no direct impact on the Company’s consolidated financial statements or operations.

As noted above and affirmed in the Fifth Amendment, SMSC paid the required annual purse enhancement of $7,380,000 and annual marketing payment of $1,620,000 for 2022.

The amounts earned from the marketing payments ~~are~~were recorded as a component of other revenue and the related expenses ~~are~~were recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three and nine months ended September 30, 2022, the Company recorded $977,000 and $1,764,000 in other revenue, incurred $916,000 and $1,603,000 in advertising and marketing expense, and incurred $61,000 and $161,000 in depreciation related to the SMSC marketing funds. ~~For~~The excess of amounts received over revenue is reflected as deferred revenue on the three and nine months ended September 30, 2021, the Company recorded $1,003,000 and $1,415,000 in other revenue, incurred $962,000, and $1,326,000 in advertising and marketing expense, and incurred $41,000 and $117,000 in depreciation related to the SMSC marketing funds.Company’s consolidated balance sheets.

Under the CMA, the Company ~~has~~ agreed for the term of the CMA ~~which has a stated term ending December 31, 2022~~ that it ~~will~~would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

~~If,~~The CMA expired by its terms on December 31, ~~2022,~~2022. Accordingly, for the ~~CMA is not extended~~three and nine months ended September 30, 2023, there were no purse enhancement payments or ~~renegotiated on economic terms substantially similar to those currently in effect or due to the parties being unable to mutually agree on other terms, the~~marketing payments under the ~~CMA will cease and future financial results from the live racing segment could be materially adversely affected.~~CMA.

As mentioned above in Note 8 of Notes to Financial Statements, on August 10, 2018, the City of Shakopee, the City of Shakopee Economic Development Authority, and the Company entered into a Redevelopment Agreement in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, including the development of public streets, utilities, sidewalks, and other public infrastructure and the City of Shakopee agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.

On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Private Redevelopment among the Company, the City of Shakopee, and the Shakopee EDA, which is effective as of September 7, 2021. Under the First Amendment and as part of the authorized changes regarding the responsibilities of the Company and the City, improvements on Unbridled Avenue will be primarily constructed by the City of Shakopee. As a result, the total estimated cost of TIF eligible improvements to be borne by the Company ~~will be~~was reduced by $5,744,000 to an amount not to exceed $17,592,881.

From time-to-time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, prospective business activities or plans that are typically preceded by words such as “believes,” “expects,” “anticipates,” “intends” or similar expressions. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties that could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties include, but are not limited to:

The Company’s President and Chief Executive Officer, Randall D. Sampson and Chief Financial Officer, Randy J. Dehmer, have reviewed the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based upon this review, these officers have concluded that the Company’s disclosure controls and procedures are effective.

There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended September 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The most significant risk factors applicable to the Company are described in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes from the risk factors previously disclosed.

~~Not Applicable.~~During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Page

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022	2

		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022	3

		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022	4

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022	5

		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

	Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	27

	Item 1A.	Risk Factors	27

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

	Item 3.	Defaults Upon Senior Securities	27

	Item 4.	Mine Safety Disclosures	27

	Item 5.	Other Information	27

	Item 6.	Exhibits	28

	Signatures		28

Schedule of non-cash investing and financing activities
Additions to land, buildings, and equipment funded through accounts payable	$	53,000	$	198,000	$	28,000		$	53,000
Dividend declared but not yet paid		341,000		—		345,000			341,000
Transfer of future TIF reimbursed costs from land, buildings, and equipment		—		471,000
Change in investee losses in excess of equity investments		1,466,000		1,286,000		(636,000	)		1,466,000
ROU assets obtained in exchange for operating lease obligations						77,550			—

Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	$	3,707,000	$	1,220,000	$	3,257,000		$	3,707,000
Interest paid		1,000		2,000		—			1,000

				*Weighted*					*Weighted*
				*Average*					*Average*
	*Deferred*			*Fair Value*		*Deferred*			*Fair Value*
	*Stock*			*Per Share*		*Stock*			*Per Share*
Non-Vested Balance, December 31, 2021		43,400		$	12.48
Non-Vested Balance, December 31, 2022							41,200		$	16.62
Granted		18,600			21.62		19,020			25.52
Vested		(20,800	)		21.32		(20,050	)		14.33
Forfeited		—			—		(1,950	)		19.07
Non-Vested Balance, September 30, 2022		41,200		$	16.62
Non-Vested Balance, September 30, 2023							38,220		$	22.13

	*Nine Months Ended September 30, 2022*												*Nine Months Ended September 30, 2023*
	*Horse Racing*			*Card Casino*		*Food and Beverage*		*Development*			*Total*		*Horse Racing*			*Casino*		*Food and Beverage*		*Development*		*Total*
Net revenues from external customers	$	15,406		$	30,395	$	7,904	$	—		$	53,705	$	11,186		$	30,322	$	7,402	$	—	$	48,910
Intersegment revenues		150			—		785		—			935		194			—		893		—		1,087
Net interest income		24			—		—		597			621		754			—		—		679		1,433
Depreciation		1,860			226		149		—			2,235		1,954			225		129		—		2,308
Segment income (loss) before income taxes		1,241			8,474		2,383		(846	)		11,252		(820	)		6,940		2,137		7,576		15,833
Segment tax expense (benefit)		(309	)		2,322		653		(232	)		2,434		(1,076	)		1,994		614		2,177		3,709

		*September 30, 2022*
Segment Assets		$	70,382			$	2,500			$	30,391			$	26,012			$	129,285

		*September 30, 2023*
Segment Assets		$	88,641			$	2,199			$	33,344			$	33,084			$	157,268

	*Nine Months Ended September 30, 2021*											*Nine Months Ended September 30, 2022*
	*Horse Racing*		*Card Casino*		*Food and Beverage*		*Development*			*Total*		*Horse Racing*			*Casino*		*Food and Beverage*		*Development*			*Total*
Net revenues from external customers	$	13,815	$	27,207	$	5,423	$	—		$	46,445	$	15,406		$	30,395	$	7,904	$	—		$	53,705
Intersegment revenues		25		—		553		—			578		150			—		785		—			935
Net interest income		1		—		—		524			525		24			—		—		597			621
Depreciation		1,887		75		152		—			2,114		1,860			226		149		—			2,235
Segment income (loss) before income taxes		94		7,193		1,417		(1,400	)		7,304		1,241			8,474		2,383		(846	)		11,252
Segment tax expense (benefit)		30		2,099		413		(409	)		2,133		(309	)		2,322		653		(232	)		2,434

		*December 31, 2021*
Segment Assets		$	44,509			$	2,801			$	26,888			$	26,773			$	100,971

		*December 31, 2022*
Segment Assets		$	71,338			$	2,425			$	30,341			$	26,475			$	130,579

Income before income taxes
Total segment income (loss) before income taxes	$	11,252		$	7,304	$	15,833		$	11,252
Elimination of intersegment (income) loss before income taxes		(2,368	)		7		(2,925	)		(2,368	)
Total consolidated income before income taxes	$	8,884		$	7,311	$	12,908		$	8,884

	*Equity Investment*			*Investee losses in excess of equity investment*			*Net Equity Investment*
Net Equity Investment Balance at 12/31/22	$	6,863,517		$	(3,185,923	)	$	3,677,594

Q1 Equity investment income (loss)		(23,232	)		1,881,744			1,858,512

Q2 Equity investment income (loss)		(26,071	)		(596,109	)		(622,180	)

Q3 Equity investment income (loss)		(24,442	)		(649,899	)		(674,341	)

Net Equity Investment Balance at 9/30/23	$	6,789,772		$	(2,550,187	)	$	4,239,585

Nine Months Ended September 30, 2022	*Operating leases*		*Finance leases*
2022 remaining	$	—	$	7,186
2023		—		19,332
Nine Months Ended September 30, 2023						*Operating leases*			*Finance leases*
2023 remaining						$	—		$	585
2024							26,785			2,339
2025							28,230			2,339
2026							—			2,339
2027 and beyond							—			4,485
Total minimum lease obligations		—		26,518			55,015			12,088
Less: amounts representing interest		—		(653	)		(1,989	)		(2,334	)
Present value of minimum lease payments		—		25,865			53,026			9,754
Less: current portion		—		(25,865	)		(25,352	)		(1,570	)
Lease obligations, net of current portion	$	—	$	—		$	27,674		$	8,184

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Simulcast	$	901,000	$	964,000	$	2,997,000	$	3,059,000
Live Racing		1,214,000		1,091,000		1,890,000		1,663,000
Guest Fees		2,133,000		1,897,000		3,449,000		3,222,000
Other revenue		483,000		349,000		1,263,000		1,055,000
Total Pari-Mutuel Revenue	$	4,731,000	$	4,301,000	$	9,599,000	$	8,999,000

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (rules 13a-14 and 15d-14 of the Exchange Act).

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (rules 13a-14 and 15d-14 of the Exchange Act).

32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

99.1	Press Release dated November ~~10, 2022~~9, 2023 announcing ~~2022~~2023 Third Quarter Results.

101	The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2022,~~2023, formatted in Inline eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, (iv) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, and (v) Notes to Financial Statements.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


	Canterbury Park Holding Corporation

Dated: November ~~14, 2022~~13, 2023	/s/ Randall D. Sampson
	Randall D. Sampson
	President and Chief Executive Officer (principal executive officer)


Dated: November ~~14, 2022~~13, 2023	/s/ Randy J. Dehmer
	Randy J. Dehmer
	Chief Financial Officer (principal financial officer, principal accounting officer)